US Student Loan Changes From July 2026: New Limits, Grad PLUS Ending and the RAP Plan
The biggest overhaul of US federal student loans in more than a decade took effect on July 1, 2026. The changes come from the 2025 budget reconciliation law and the Department of Education’s final rules. They affect how much students and parents can borrow, which repayment plans are available, and what existing borrowers should think about before switching plans.
Quick answer: For new loans made on or after July 1, 2026, Grad PLUS loans are closed to new borrowers, graduate and professional students face new annual and lifetime caps, Parent PLUS loans are capped, and new borrowers choose between a Tiered Standard plan and the new income-based Repayment Assistance Plan (RAP). Older income-driven plans are being phased out by July 1, 2028.
1. New borrowing limits
| Loan type | Annual limit | Aggregate limit |
|---|---|---|
| Graduate students | $20,500 | $100,000 |
| Professional students (e.g. medicine, law, under the rule’s definition) | $50,000 | $200,000 |
| Parent PLUS (per dependent student) | $20,000 | $65,000 |
| Lifetime cap, all federal student loans (most borrowers) | n/a | $257,500 |
Undergraduate Direct Loan limits are largely unchanged. Schools may set lower limits for a program, as long as they apply to every student in it, and part-time students receive reduced limits.
2. Grad PLUS is closed to new borrowers
Grad PLUS loans used to let graduate students borrow up to the full cost of attendance. They are no longer available to new borrowers. Students who were already enrolled in a program before July 1, 2026 and had already received a loan for it can keep the old limits for up to three years or their expected time to finish, whichever is shorter, provided they stay continuously enrolled.
If the new caps leave a funding gap, compare scholarships, assistantships, employer support and payment plans before turning to private student loans, which lack federal protections such as income-driven repayment and Public Service Loan Forgiveness.
3. Two repayment plans for new loans
Tiered Standard plan
Fixed monthly payments over 10, 15, 20 or 25 years, depending on how much you owe. The minimum payment is $50.
Repayment Assistance Plan (RAP)
- Payments are 1% to 10% of adjusted gross income on a sliding scale, with a $10 monthly minimum.
- If your on-time payment does not cover the month’s interest, the unpaid interest is waived, so your balance does not grow.
- Each on-time payment is matched with up to $50 of extra principal reduction.
- Remaining balances are forgiven after 360 qualifying payments (30 years).
- RAP counts toward Public Service Loan Forgiveness.
4. What current borrowers should know
- Older plans are being phased out. Legacy income-contingent plans fully end on July 1, 2028.
- Switching is not always better. Time spent in IBR, ICR or PAYE counts toward RAP forgiveness, but RAP months do not count toward IBR forgiveness. Higher earners close to the end of a 20- or 25-year IBR clock should be careful about switching.
- More changes in 2027. Changes to loan rehabilitation and deferment take effect on July 1, 2027.
Use the official Loan Simulator at StudentAid.gov to compare your payments under each plan before you change anything.
5. Watch out for student loan scams
Big rule changes bring a wave of “debt relief” calls and messages. You never have to pay a company to change repayment plans or apply for forgiveness; it is free through StudentAid.gov or your loan servicer. Never share your FSA ID. Our guide to personal loans also covers the warning signs of loan scams.
Frequently asked questions
Can I still get a Grad PLUS loan?
Only if you qualify for the transition exception for students already enrolled in a program before July 1, 2026. New borrowers cannot.
Do the new limits apply to my existing loans?
No. The limits apply to new borrowing. Your existing loans keep their terms, but repayment plan options are changing over the next two years.
What is the minimum payment under RAP?
$10 a month.
Does RAP qualify for Public Service Loan Forgiveness?
Yes.